TY - JOUR
AU - Ju,Jiandong
AU - Shi,Kang
AU - Wei,Shang-Jin
TI - On the Connections between Intertemporal and Intra-temporal Trades
JF - National Bureau of Economic Research Working Paper Series
VL - No. 17549
PY - 2011
Y2 - October 2011
DO - 10.3386/w17549
UR - http://www.nber.org/papers/w17549
L1 - http://www.nber.org/papers/w17549.pdf
N1 - Author contact info:
Jiandong Ju
Shanghai University of Finance & Economics
Shanghai 200433
CHINA
E-Mail: ju.jiandong@shufe.edu.cn
Kang Shi
Department of Economics
Chinese University of Hong Kong
Shatin, New Territories
Hong Kong
E-Mail: kangshi@cuhk.edu.hk
Shang-Jin Wei
Graduate School of Business
Columbia University
Uris Hall 619
3022 Broadway
New York, NY 10027-6902
Tel: 212/854-9139
E-Mail: shangjin.wei@columbia.edu
AB - This paper develops a new theory of international economics by introducing Heckscher-Ohlin features of intra-temporal trade into an intertemporal trade approach of current account. To do so, we consider a dynamic general equilibrium model with tradable sectors of different factor intensities, which allows for substitution between intertemporal trade (current account adjustment) and intra-temporal trade (goods trade). An economy's response to a shock generally involves a combination of a change in the composition of goods trade and a change in the current account. Flexible factor markets reduce the need for the current account to adjust. On the other hand, the more rigid the factor markets, the larger the size of current account adjustment relative to the volume of goods trade, and the slower the speed of adjustment of the current account towards its long-run equilibrium. We present empirical evidence consistent with the theory.
ER -